The move comes as industry sources indicate that the HSE had given up on its attempts to persuade the state's drug wholesalers to reduce drug prices so pharmacies' profit margins were not affected by the cuts.

The HSE told the Sunday Tribune that it hoped to "establish a fair and transparent payment for professional services that reflects the value of those services rather than. . . commodity prices".

It did not comment on what effect this would have on the 100m-worth of savings it had hoped to achieve through cutting the wholesale margin.

It also said, however, that there was "unlikely to be any further efficiencies to be gained from the current review of the pharmaceutical supply chain".

The margin is paid by the HSE to pharmacies, which then pass it on to wholesalers and the HSE is continuing to insist that it has struck a deal with wholesalers where pharmacies would not be charged more for drugs than they are given by the state.

Senior industry sources said, however, that this was not the case and that the HSE was now trying to negotiate a deal with the pharmacists' representative body, the Irish Pharmaceutical Union (IPU), to prevent closures.

They added that while some informal contact was still ongoing between the HSE and wholesalers, talks with one wholesaler, Uniphar, had already finished without agreement.

"The HSE know that we will not reduce our prices and that it will impact on pharmacies but they don't care: in their eyes, they have just removed wholesale discounts from the system, " said one source.

Industry sources claimed that the HSE had been forced to change its approach after it received legal advice from the attorney-general's office that it could not force wholesalers to cut wholesale drug prices but the HSE had denied this.

The IPU said that talks with the HSE were at an extremely early stage.

However, a spokesman said that the situation remained "extremely grave and we fear for our members if the HSE pursues this decision from 1 December. If the decision is implemented, it will lead to closures".